The China Perspective cited Mr Liu Zhenjiang deputy director of the China Iron and Steel Association as saying that the Chinese steel industry is likely to see its worst ever quarter in Q1 2014.

The steelmakers tracked by the CISA posted a CNY 1 billion loss in January with 43% of them operating in the red, the highest percentage in a single month. The loss might have double to CNY 2 billion in February.

Mr Liu said that crimped demand and tougher environmental standards have contributed to the weakness of the steel industry, among other factors such as stringent credit and the crackdown on excess capacity. Demand for steel in China fell 8.6% in January from a year earlier, while output contracted 3.2%; a steel price index compiled by the CISA dropped to a 20 year low of 96.

Mr Liu advised steelmakers to pare down both capacity and actual production and move up the value chain to increase margins as well as operating efficiency. The good news is that the price of iron ore imports is expected to continue dipping to between USD 100 per tonne and USD 110 per ton this year.